Tax Resolution Services: Offer in Compromise Requirements

Offer In Compromise

There are many different options when it comes to Tax Resolution Services, but which one is best for your situation depends on certain specifics and details. In this blog post, we’ll discuss Offer in Compromise in greater detail. In one of our previous blog posts in the Tax Resolution Services series, Tax Resolution: What are my Options?, we mentioned some of the other tax relief solutions like Currently Non-Collectible, Penalty Abatement, Installment Agreements and the Partial Pay Installment Agreement. Many of the options, including Offer in Compromise, require that an individual would experience financial hardship by repaying their tax debt to the IRS, so next, we’ll take a look at what that means exactly. 

If you’re just starting your research about Tax Resolution Services, get started with our first blog post in the series, Tax Resolution: What is it?

Tax Resolution Services: Experiencing Financial Hardship

As of November 21st, 2020, according to H&R Block, the IRS Definition of Financial Hardship is as follows: “a hardship exists if a taxpayer is unable to pay reasonable basic living expenses.”

According to the H&R Block Tax Information Center, “The IRS may agree that you have a financial hardship (economic hardship) if you can show that you cannot pay or can barely pay your basic living expenses. For the IRS to determine you are in a hardship situation, the IRS will use its collection financial standards to determine allowable basic living expenses.”

As you can see, financial hardship isn’t just something you can just declare and then receive an opportunity to lower your tax debt. The IRS has a process, by using its collection financial standards, to decide whether an individual qualifies and then determine what the IRS believes to be their “allowable basic living expenses.” This is extremely important, because to qualify for a tax resolution service like Offer in Compromise, you must be able to demonstrate, by the IRS’s standards, that repaying the outstanding tax debt would place you in a position of financial hardship.

Offer in Compromise: the Requirements

Once you know, or are able to demonstrate, that you would experience financial hardship by repaying your debt to the IRS, you know that you may be able to qualify for the Offer in Compromise tax resolution option. But, unfortunately, there are additional requirements needed to qualify.

On our Offer in Compromise Page, we go into further detail, but here is a short summary of some of the other prerequisites you must meet in order to file for Offer in Compromise:

  • file all tax returns you are legally required to file.
  • have received a bill for at least one tax debt included on your offer.
  • make all required estimated tax payments for the current year.
  • make all required federal tax deposits for the current quarter if you are a business owner with employees. Your offer will be immediately returned without further consideration if you have not filed all tax returns you are legally required to file.
    • You must not have any open bankruptcy cases.
    • You must not be able to pay the debt in full through a payment installment plan or with any current or future assets

If you meet these requirements, or are able to with some assistance – the team at Bullseye Tax Relief is here to help – then Offer in Compromise may be the tax resolution service for you! In our next blog post, Tax Resolution Services: Offer in Compromise, we’ll discuss a little more about the Offer in Compromise process and the different types. Check back soon!


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